What regulations apply to charities regarding money laundering?
Do they have any equivalent to 'know your client', like 'know your donor'? Do they have a duty to report suspicious transactions? Are they forced to have their accounts audited?
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1Type of charity matters. Also, businesses aren't necessarily regularly audited (SOX is publicly traded, and likely above a certain market valuation, neither of which applies). Further, money laundering needs a way to get out the money received. Charities don't produce dividends (other than salaries), so you'd need at least one business in the chain (ie, food supplier for a soup kitchen)... at which point the transactions of that business would be money laundering, so you wouldn't need the charity at all.– Clockwork-MuseCommented May 30, 2022 at 18:21
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@Clockwork-Muse I could easily imagine how a "charity" could do that. Assume the charity's official goal is to buy houses for the poor. But instead of asking the public for donations it uses some black-market money to buy the houses.– PMFCommented May 30, 2022 at 19:32
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@PMF But why would the criminal who wants to launder money give it to the charity? He doesn't get anything back if the charity uses his money to buy houses for the poor.– quaragueCommented May 30, 2022 at 19:42
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@quarague The houses would be rented out, not given away completely, so that the charity has an income from them. And then you could in turn e.g. hire the criminal for (poorly done but expensive) maintenance work.– PMFCommented May 30, 2022 at 19:49
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2The most common way to get out the money for fake charities, public administrations and even private companies is to use paid consultancies. For example a charity might ask why the poverty rate is so high in a certain area, commission a study, pay for hundreds of hours of field work when the actual study was done without any field work.– FluidCodeCommented May 30, 2022 at 22:09
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1 Answer
Most U.S. money laundering laws that apply to all private businesses, including reporting certain kinds of suspicious transactions and doing due diligence that a grant does not amount to support of a terrorist organization, apply to charities.
answered May 31, 2022 at 23:26
